Performance of Temasek Holdings vs Broad-based Market Indices

Parliamentary Question by Mr Leon Perera:

To ask the Minister for Finance (a) whether the Government assesses Temasek Holding’s performance in relation to the performance of broad-based market indices such as the Dow Jones Industrial Average and the MSCI World Index over the past 10 years; (b) if so, whether it will consider publishing the results of these assessments; (c) if not, how are assessments of performance made by the Government; and (d) whether the Government will consider publishing metrics on the performance of Temasek Holdings and GIC based on risk-adjusted performance metrics such as the Sortino ratio. 

Parliamentary Reply by Minister for Finance, Mr Lawrence Wong:

The Government does not assess Temasek’s performance using a single metric. Instead, we look at a number of indicators, including risk-adjusted returns. Our focus is on its overall long-term performance, not year-to-year.

We also take into consideration a range of factors when assessing Temasek’s performance, including its investment strategy and risk exposure. In particular, Temasek’s investment approach is different from that of a benchmark investor seeking to outperform a broad-based market index.  Instead, as an active, bottom-up investor, Temasek will invest in a company based on its business and long-term growth potential. Another important difference is that Temasek invests across listed and unlisted assets. The latter are not covered by broad market indices.

The general market indices, such as MSCI World Index are very broad indices with a wide range of stocks across different countries and industry sectors. The allocations across sectors and countries are typically based on the market capitalisation of listed stocks. Temasek’s portfolio composition is very different from these indices.

Having said that, market indices provide useful broad reference points as to how the overall market has moved over time. Temasek has presented such comparisons of its performance against various MSCI indices on its website.

Information on the returns and risk performance of GIC’s and Temasek’s portfolios is available publicly. GIC publishes both returns and volatility of its portfolio over various horizons. Temasek publishes its annual returns, from which one can also derive its portfolio volatility, and thus relevant risk-return ratios.